American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response?
American Economic Journal: Macroeconomics
vol. 13,
no. 4, October 2021
(pp. 369–410)
Abstract
Uncertainty about the future rises in recessions. But is uncertainty a source of business cycles or an endogenous response to them, and does the type of uncertainty matter? We propose a novel SVAR identification strategy to address these questions via inequality constraints on the structural shocks. We find that sharply higher macroeconomic uncertainty in recessions is often an endogenous response to output shocks, while uncertainty about financial markets is a likely source of output fluctuations.Citation
Ludvigson, Sydney C., Sai Ma, and Serena Ng. 2021. "Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response?" American Economic Journal: Macroeconomics, 13 (4): 369–410. DOI: 10.1257/mac.20190171Additional Materials
JEL Classification
- D81 Criteria for Decision-Making under Risk and Uncertainty
- E23 Macroeconomics: Production
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- G14 Information and Market Efficiency; Event Studies; Insider Trading
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